The Pros and Cons of Car Title Loans

In our struggling economy, many people are looking for alternative ways to bring cash in fast.  There are multiple options that one can look toward when trying to acquire these extra funds, but  while some options seem easy, it is extremely important to examine and consider all aspects of each option before committing to one.  They type of loan that you can receive from a bank is typically harder to acquire because your credit history and most of your financial background will be looked into.

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Applying for a car title loan is one option that may look very enticing if you do not have an impressive credit history, or any other means of collateral or security that could be used for obtaining a loan.  Because of the level of risk that can be associated with car title loans, you should first thoroughly examine your situation and make sure this type of loan is the best possible decision. Putting your means of transportation up for gamble is a big decision that could turn out either good or bad in the end.  By properly examining the pros and cons of car title loans, you should be able to determine if applying for a car title loan is the proper way for you to receive the funds that you are in need of.

Pros of Taking Out a Car Title Loan

  • Fast cash— The most obvious pro of a car title loan is fast cash.  It is extremely easy to find businesses in your city that will grant you a car title loan. Just take a look at this store locator from When you apply for a car title loan, you are putting your car up as collateral, so it is generally pretty easy to convince the loaner to spot you money.  Generally speaking, it takes about half of an hour, or sometimes even less, to receive your results and know if you are able to get the loan that you seek.  After receiving your loan result, it normally only takes a few days to receive the funds.
  • Keeping your collateral— Another pro of car title loans is the fact that you get to keep the collateral used- your car- and still receive the loan money. If all goes as planned and you are able to return the money in the specified time, it is as if nothing ever happened.
  • No credit check— In some cases, there is no credit check required for a car title loan because the loan is based off of your vehicle as collateral.  Most companies that do not check your credit won’t conduct a background check either. This simple process differs greatly from the process you must undergo when obtaining a loan from a bank, which can be beneficial for loan seekers who have a bad credit history and cannot obtain the funds they need because of that history.

Cons of Taking out a Car Title Loan

  • Prized possessions—  One of the biggest cons of acquiring a car title loan is the fact that you must place one of your most prized, expensive possessions up for collateral in order to obtain the funds in which you seek.  In a struggling economy, people have a hard time acquiring and holding on to assets.  Vehicles are the premier asset in most people’s and family’s lives.  Having to put that item up for collateral should be looked to as a last resort only, and with the full intention of not losing that item of collateral. 
  • Interest rates— Car title loans are a short-term loan with usually high interest rates.  The interest rates from a car title loan can sometimes be too high and cause the borrower to lose their vehicle.  These rates can be way steeper than those from a credit card.  By taking out a car title loan and having to deal with high interest rates, you may end up in a worse financial state than you were before the loan by accumulating debt and losing your vehicle.
  • Losing your vehicle— Car title loans can be tremendously risky and may not be worth this risk when examining the fact that you could easily lose your vehicle.  At any time during the loan process, if you default on any payments or are unable to meet a deadline for any reason, be it a medical emergency or worse, you could lose your car and be rendered immobile.  Before taking out a car title loan, you should have a detailed plan to counteract any event that may prevent you from making proper, on-time payments to the lender. When taking out a car title loan as a last means of obtaining funds, it is best to be prepared so you are not caught off guard. 

LaMarcus Irby is a financial advisor with more than 15 years of experience. He’s also a contributing writer to many top financial blogs across the web.

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